Activists increasing success gaining board seats at U.S. companies

Mar 11, 2014

In another sign of the increasing influence of activist investors, the pace of activist campaigns resulting in board seats is running at a five-year high. In the first two months of 2014, activist investors were granted one or more board seats at 16 U.S. companies, the most since 2009 where 22 campaigns at 21 distinct companies resulted in board seats. Among the campaigns that resulted in board seats in January and February were those waged by prominent activists Elliott Management Corporation at Juniper Networks, Inc. and Compuware Corporation, GAMCO Asset Management Inc. at Ampco-Pittsburgh Corporation, JANA Partners LLC at QEP Resources, Inc., and Trian Fund Management, L.P. at Mondelez International, Inc. The full year campaign total resulting in board seats in 2013 was also a multi-year high.

The data includes all campaigns where activist investors attained board seats via a vote at a proxy fight, to settle a proxy fight, granted as part of other activist campaigns, or granted to prominent activists that are Schedule 13D filers but have not publicly agitated at the company, and is based on the date that the seat was granted or won. In 2013, the number of campaigns where the activist was granted a board seat without having to go to a shareholder vote increased by 9% from 2012 levels and 41% versus calendar 2011. Carl Icahn commented in a recent interview that even he was "surprised" by how often he is being invited to join company boards without having to launch a proxy fight.

While several factors may be contributing to this recent concessionary approach of U.S. companies, the wide spread support activists are getting from mainstream institutional investors is undoubtedly a key driver of the increased willingness of companies to offer up board representation. Sixty-percent of the proxy fights for board seats that went to an actual vote in 2013 resulted in a partial or outright victory for the activist. That's the highest win rate in the 13 years we have been tracking this data. By comparison, in 2003 the activist win rate was only 39%.

What makes the 60% win rate even more noteworthy is the fact that this statistic is artificially low. Companies and their advisers typically keep close tabs on preliminary vote tallies during a proxy fight and will often offer to settle if it appears that they may be on the losing side of the vote. For example, we saw Hess Corporation settle with Elliott Management the very morning of Hess' 2013 annual meeting.

These favorable conditions aren't being lost on activist investors as proxy fights for board seats announced at this point in the year is at a five-year high. As of March 7, 49 proxy fights for board seats have been announced. In the same periods in 2013 and 2012 44 and 41 proxy fights had respectively been announced.

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